27 August 2016

RATIONALISATION OF COAL TARIFF STRUCTURE BY MINISTRY OF RAILWAYS

Continuing with its objective of Rationalising freight rate structure, Ministry of Railways on August 23 announced Rationalisation of Coal Tariff Structure. The highlights of the rationalisation are given below.
Reduction in Rates :The proposed coal tariff rationalization would result in reduction in rates on long leads due to reduction in distance slabs beyond 700 km.
The % reduction in freight rates for distance between 1501 to 2000 km is likely to be in the range of 4% to 13%, while beyond 2000 km the reduction is likely to be in the range of 9% to 15%.
Changes in distance slab :The coal tariff is proposed to be rationalized by increasing the distance slabs in the short and medium leads between 201-700 km and reducing the distance slabs beyond 700 km. The proposed modification in the distance slabs is almost a revenue neutral exercise as it would have the impact of reducing the freight rates beyond 700 km and increasing slightly the freight rates between 201-700 km.
No changes in distance slabs between 0-200kms :No changes have been proposed in tariff rates over short leads as the distance slabs between 0 km to 200 km are proposed to be kept at the same level. In the short leads, concessions are already being given between 0 to 100 km in the range of 5% to 30% depending upon the distance slabs.
In addition Levy of Coal Terminal Surcharge @ Rs 55 each at loading and unloading end has been imposed.
This step would also lead to better utilization of empty stabled rakes as this would result in encouraging long lead traffic and thus reduce terminal handling frequently. WTR would also reduce due to increased efficiency.
Tariff rationalization would also result in reducing import of coal for power stations near ports by making coal transportation from mines cheaper over long distances.
Tariff rationalization in the freight rates for coal would facilitate more generation schedules for long lead power plants by making long distance power plants competitive in the Merit Order.
More rationalization of freight rates by bringing innovative schemes like liberalized Station to Station Rates, Long Term Tariff Agreements at pre-determined price escalation principles and further liberalized Empty flow direction policies would be introduced in near future.
Various policy initiatives in the form of tariff rationalization have been taken by Railway in recent months including allowing Two-point/ Multi point/ Mini Rake in all kinds of covered wagons, minimum distance for Mini Rakes was increased from 400kms to 600km., automatic Freight Rebate Scheme in Traditional Empty Flow Direction has been extended, Port Congestion Charge (10% of Base Freight) has been withdrawn, Merry-go-Round System has been introduced, dual policy for Iron Ore has been abolished, Roll-on Roll-off scheme introduced and Withdrawal of Busy Season Charge (15% of Base freight)